April 2006

Disclaimer: Agrilaw is a syndicated column produced by the full service London law firm of Cohen Highley LLP.  Paul G. Vogel, a partner in the firm, practises in the area of commercial litigation and environmental law.   Agrilaw is intended to provide information to farmers on subjects of interest and importance. The opinions expressed are not intended as legal advice.  Before acting on any information contained in AgriLaw, readers should obtain legal advice with respect to their own particular circumstances.

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Canadian cattle farmers have suffered severe financial losses as a result of detection of BSE in a single Alberta cow and the closure of the borders to the United States, Mexico and Japan to Canadian cattle and beef products in May, 2003. For farmers who did not purchase the contaminated feed which caused the “mad cow disease”, did not lose any cattle as a result of using the feed, and who may never have exported a cow across an international border, does the law provide any remedy for their loss?

The Ontario Superior Court of Justice has recently considered a proposed class action brought by such a cattle farmer on behalf of commercial cattle farmers in Ontario and some other Canadian provinces. This action seeks recovery of the economic losses of these farmers arising from the international border closures. Named as a defendant in the action is the Canadian manufacturer of the contaminated cattle feed.

Upon a motion by the defendant to strike out this claim as disclosing no reasonable cause of action, the court described the plaintiff’s claim as follows:

“As against (the manufacturer) the plaintiff pleads breaches of a duty of care and of a duty to warn. In particular, it is pleaded that (the manufacturer) owed a duty of care to the plaintiff to use all due care in ensuring its animal feed products were safe, and was grossly negligent in the manufacture and sale of the (contaminated feed) …"

“As stated previously, there is no direct relationship between the plaintiff and (the manufacturer) in contract or arising from the usage of the (manufacturer’s) product by the plaintiff. Nor is it alleged that there is any other direct commercial relationship between them. Similarly, the plaintiff has not lost any cattle or suffered any property damage from usage of the (manufacturer’s) product. Rather, the plaintiff claims, in essence, that (the manufacturer) negligently, recklessly or knowingly sold a product to another farmer that had the potential to, and did, shut down the Canadian cross border cattle trade when used by the purchasing farmer. As a result, the plaintiff alleges that (the manufacturer) is liable to Canadian cattle farmers at large.”

In order to pursue such a claim, the court required that the plaintiff be able to demonstrate both a foreseeable risk of harm arising from the defendant’s conduct and a relationship between the plaintiff and defendant sufficiently proximate in law to give rise to a duty of care. With respect to foreseeability of harm, the court concluded:

“When considered in conjunction with other allegations in the Statement of Claim which include the voluntary ban on (ruminant meat and bonemeal) in Australia in 1996 as a prudent practice because of the potential for BSE infection from the use of such feed, the participation of (the manufacturer’s Australian parent company) in the industry group that concluded a voluntary ban was advisable and the allegation that (the parent company) and (the manufacturer) shared a common chairman of the board of directors, I am satisfied that the harm alleged by the plaintiff was reasonably foreseeable by (the manufacturer).”

With respect to the issue of proximity of the plaintiff and defendant, the court considered that liability of the manufacturer may be determined on the basis of its introduction into the marketplace of a contaminated feed product which had the potential to, and which did, disrupt the whole of the cattle industry in Canada. The court stated:

“… where BSE is concerned, it brings the supplier of feed to one cattle owner into proximity with all other cattle owners. If feed is supplied which causes an outbreak of BSE, regardless of how isolated, all cattle and cattle owners are affected. In other words, all cattle owners are treated as one contiguous whole."

“Proximity is a relative term. Here, there are recognized international procedures in place that in essence mandate a relationship between otherwise disparate interests where BSE is at issue. There does not seem to be any policy reason to ignore this reality in a consideration of whether a proximal relationship may exist between parties who, in other circumstances, might not be regarded as proximate.”

In response to the defendant manufacturer’s assertion this would unfairly impose upon it unlimited liability to an unlimited class, the court stated:

“(The manufacturer) allegedly knew or ought to have known that cattle farmers throughout Canada were at risk should a BSE outbreak occur as a result of the normal use of its product … There is no authority for the proposition that extensive liability is equivalent to indeterminate liability. It is the very nature of tort law that seemingly insignificant acts can have catastrophic consequences in the context of a proximal relationship … Whether a person takes steps to avoid the risks or mitigate the consequences, or instead, chooses to court the risks, is a matter of choice for that person. Based on the authorities, it appears that policy concerns are satisfied if the risk and its consequences are apparent to the potential tortfeasor.”

The court has decided that the manufacturer of the contaminated feed may be responsible for the financial losses suffered by Canadian cattle farmers and that the plaintiff in this proposed class action should be permitted to pursue this claim. However, the claim must now be qualified as a class action before the possible legal liability of the defendant will be determined. The significance of the case is that it establishes that a manufacturer of contaminated feed in such circumstances may have liability for losses suffered arising from resulting regulatory restrictions by those with whom the manufacturer has no commercial relationship.